Banks Depleting Earnings Backstop

Days Numbered for Using Reserves to Increase Profit

By

Michael Rapoport

February 3, 2012

The rainy-day funds that U.S. banks have been tapping to boost their earnings could soon begin to dry up, and that doesn't bode well for bank profits.

Many banks have been "releasing" reserves against bad loans since the worst of the crisis passed and the economy began recovering. That money flows to the bottom line, helping some banks boost earnings at a time when lending and trading profits have been soggy.